Competition Matrix

Competition analysis in marketing and strategic management is an assessment of the strengths and weaknesses of current and potential competitors. This analysis provides both an offensive and defensive strategic context to identify opportunities and threats. Profiling coalesces all of the relevant sources of competitor analysis into one framework in the support of efficient and effective strategy formulation, implementation, monitoring and adjustment.[1]

Competitor analysis is an essential component of corporate strategy. It is argued that most firms do not conduct this type of analysis systematically enough. Instead, many enterprises operate on what is called “informal impressions, conjectures, and intuition gained through the tidbits of information about competitors every manager continually receives.” As a result, traditional environmental scanning places many firms at risk of dangerous competitive blind-spots due to a lack of robust competitor analysis

Competitor array
One common and useful technique is constructing a competitor array. The steps include:

Define your industry – scope and nature of the industry

Determine who your competitors are

Determine who your customers are and what benefits they expect

Determine what the key success factors are in your industry

Rank the key success factors by giving each one a weighting – The sum of all the weightings must add up to one.

Rate each competitor on each of the key success factors

Multiply each cell in the matrix by the factor weighting.

This can best be displayed on a two dimensional matrix – competitors along the top and key success factors down the side. An example of a competitor array follows:[3]

Key Industry
Success Factors

Weighting

Competitor
#1 rating

Competitor
#1 weighted

Competitor
#2 rating

Competitor
#2 weighted

1 – Extensive distribution

.4

6

2.4

3

1.2

2 – Customer focus

.3

4

1.2

5

1.5

3 – Economies of scale

.2

3

.6

3

.6

4 – Product innovation

.1

7

.7

4

.4

Totals

1.0

20

4.9

15

3.7

In this example competitor #1 is rated higher than competitor #2 on product innovation ability (7 out of 10, compared to 4 out of 10) and distribution networks (6 out of 10), but competitor #2 is rated higher on customer focus (5 out of 10). Overall, competitor #1 is rated slightly higher than competitor #2 (20 out of 40 compared to 15 out of 40). When the success factors are weighted according to their importance, competitor #1 gets a far better rating (4.9 compared to 3.7).

Two additional columns can be added. In one column you can rate your own company on each of the key success factors (try to be objective and honest). In another column you can list benchmarks. They are the ideal standards of comparisons on each of the factors. They reflect the workings of a company using all the industry’s best practices.

Competitor profiling

The strategic rationale of competitor profiling is powerfully simple. Superior knowledge of rivals offers a legitimate source of competitive advantage. The raw material of competitive advantage consists of offering superior customer value in the firm’s chosen market. The definitive characteristic of customer value is the adjective, superior. Customer value is defined relative to rival offerings making competitor knowledge an intrinsic component of corporate strategy. Profiling facilitates this strategic objective in three important ways. First, profiling can reveal strategic weaknesses in rivals that the firm may exploit. Second, the proactive stance of competitor profiling will allow the firm to anticipate the strategic response of their rivals to the firm’s planned strategies, the strategies of other competing firms, and changes in the environment. Third, this proactive knowledge will give the firms strategic agility. Offensive strategy can be implemented more quickly in order to exploit opportunities and capitalize on strengths. Similarly, defensive strategy can be employed more deftly in order to counter the threat of rival firms from exploiting the firm’s own weaknesses.[2]

Clearly, those firms practicing systematic and advanced competitor profiling have a significant advantage. As such, a comprehensive profiling capability is rapidly becoming a core competence required for successful competition. An appropriate analogy is to consider this advantage as akin to having a good idea of the next move that your opponent in a chess match will make. By staying one move ahead, checkmate is one step closer. Indeed, as in chess, a good offense is the best defense in the game of business as well.[2]

A common technique is to create detailed profiles on each of your major competitors. These profiles give an in-depth description of the competitor’s background, finances, products, markets, facilities, personnel, and strategies. This involves:

A competitor’s media strategy reveals budget allocation, segmentation and targeting strategy, and selectivity and focus. From a tactical perspective, it can also be used to help a manager implement his own media plan. By knowing the competitor’s media buy, media selection, frequency, reach, continuity, schedules, and flights, the manager can arrange his own media plan so that they do not coincide.